# Indirect cost calculation and process

## Calculating indirect cost

The following is the formula for calculating indirect cost rate, also known as composite rate, per the operating agreement.

### Allocated cost centers

Allocated costs centers are used in determining ALA’s total indirect costs and include both direct and indirect costs that are generated in a given area ie operating supplies, telephone, audit/bank fees do not incur indirect costs – direct costs only.

They are units or activities used to determine indirect costs and include the following (*Denotes units or areas that incur both direct and indirect costs):

1. Distribution Center*
2. Building Operations*
3. Human Resources
4. Library/ORS*
5. Production Services (net chargebacks)*
6. Reprographics (net chargebacks)*
7. Membership Services*
8. Operating Supplies (net chargebacks)
9. Equipment Repairs and Maintenance/Lease
10. Telephone Expense (net chargebacks)
11. Public Information Office*
12. Information Technology & Telecommunication Services*
13. Financial Services*
14. Audit and Bank Fees
15. Member Programs and Services*
Allocation methods and related cost centers
Statistics How calculated Cost centers
F.T.E.'s 08/XX Table of Authorized Positions Operating Supplies, Human Resources
Square Footage 20XX Space Analysis Building Operations, Huron Plaza, HQ Building and Washington Office
Number of Lines 20XX Count Telephone Expense, Repairs and Maintenance and Leases
Inter-Unit Transfers FY 20XX Expenses Distribution Center, Reprographics Center and Production Services
Number of Members FY 20XX Statistics Membership Services/Handbook of Organization
Unit Revenue FY 20XX Audit Statements Audit and Bank Fees
Number of Transactions Actual Financial Services
Library Usage Actual Library
Number of PC's Actual ITTS
Time Allocation FY 20XX Estimate (%)  of Usage PIO

The following table lists the departments directly assessed for direct and indirect costs from cost centers.

Areas assessed directly
Department Usage survey
HQ Building 710
Executive Building/Council 101/102
Executive Office 103
LARC/ORS 104/109
Staff/Office Support Services 501
ITTS 505
Human Resources 506
Distribution Center 509
Reprographics 510
Building Maintenance 511
Membership Services 250/251
Fiscal Services 550-552
Member Programs/Services AED 115/116/200/230
PIO 113
Production Services 350
Publishing/Marketing 353
Offices & Committees 106/107/108/111/112/114/120/150/151/152
Conference Services 220-221
Products & Promotions 313
Publishing AED 300
ALA Editions 301
Booklists 302
American Libraries 303
ALA TechSource 305
PLA 401
ACRL 403
CHOICE 404
AASL 405
ASCLA 406
ALCTS 407
LAMA 409
RUSA 410
ALTA 411
LITA 412
ALSC 413
YALSA 414
Round Tables 600-619
Restricted Funds 47/48
Related Interest Groups 903-920

### Four-step calculation process

Calculating indirect cost is a four-step process:

1. Allocate total ALA expenses to each unit as incurred.
2. Update allocation methodologies and apply to indirect cost centers (See Allocation Methodology Information Request below).
3. Determine direct/indirect cost incurred by indirect cost centers (16) after the methodology has been applied. See the  Human Resources Expense Allocation worksheet example (Opens an Excel spreadsheet).
4. Allocate indirect costs and revenue generated by indirect cost formula components as required by Operating Agreement (See Cost Caluclation Formula above).

This sample flow chart illustrates this process using the Human Resources spreadsheet example from a previous fiscal year.